Does Firms’ Working Capital Efficiency Matter in Dividend Payout: Empirical Evidence from India

Abstract

The objective of this study is to assess the impact of working capital efficiency (WCE) (proxied by net trade cycle (NTC)) on the dividend payout (proxied by dividend payout ratio (DPR)) of the listed non-financial Indian firms. This study addresses the research gap in the literature about the influence of WCE on firms’ earnings distributed to equity shareholders as dividends in the Indian market. We have used secondary data of 150 firms that were listed on the Bombay Stock Exchange for the period 2012–2018 and analysed the data of the sample firms using the Tobit regression model. Our results indicate a negative and significant relationship between the NTC and the DPR of the sample firms. However, the beta coefficient of NTC was found to be very small, suggesting that the lower NTC may not inevitably generate a higher DPR of firms in the Indian context.

Keywords

Working Capital Efficiency Net Trade Cycle Cash Conversion Cycle Indian Firms Dividend Payout Dividend Yield

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